Obama, Romney discuss Apple, manufacturing during debate

updated 03:00 am EDT, Wed October 17, 2012

by MacNN Staff

Candidates share their perspective on competing with China

Near the end of Tuesday's second Presidential Debate between Republican Mitt Romney and Democrat Barack Obama, the two men were asked about how the US could "bring back" manufacturing jobs to America rather than have the majority of such work be done in countries such as China. True to form, the two men provided very different answers to the question, and illustrated many of their differences in their responses. Governor Romney focused on China's "cheating," while Obama said the real solution was not in low-skilled manufacturing jobs.

Romney decried China's stealing of intellectual property, the way the country games the currency system to prop up its own economy, and said that China wasn't "playing fair," making it impossible for the US to compete. He said that on "day one" he would name China as a currency manipulator, which would allow the US to dictate higher tariff on imported goods. At another point in the debate, Romney mentioned that US jobs needed to be "more flexible" to compete but didn't elaborate on what that actually meant, though critics said he was referring to lowering wages. He hinted that he would give further tax breaks to companies that "bring back" manufacturing jobs to the US, apparently unaware that the Obama administration already has a similar program in place.

Obama repeated a view that he has espoused several times, one that has been echoed by former Apple CEO Steve Jobs and former President Clinton: that low-skill, low-wage jobs like those of the Foxconn workers are never "coming back" to the US (Chinese-style manufacturing jobs haven't been here since the Industrial Revolution, argue critics), and that education and skills training is where the US should put its emphasis to create a workforce that excels in higher-skilled and thus higher-paying jobs. In his brief remarks he may have given some viewers the impression that he envisions everyone being a scientist or engineer, but supporters contend Obama was referring to jobs that pay living wages at various skill levels but can provide for a stable jobs market consistent with a decent living to the US standard for the worker and their family.

The question in general was a bit loaded, since the US, as Jobs observed, simply can't match the Chinese either on cost or on worker mobility anytime in the foreseeable future. China has invested in factories that employ tens of thousands of workers and built campuses where the workers live both on-duty and off, in small dorm rooms and at wage levels and long hours few Americans would find acceptable. Because the workforce lives at the factory, changes in manufacturing plans, output and design can be rapidly accommodated in a way no US factory could handle.

Another factor in the China equation -- even before one gets to the low wages (by US standards, higher-than-average by Chinese standards) that allows items like the iPad to be practically hand-made -- is that all the component manufacturers, parts suppliers and other elements in the overall chain of pieces that make up a product like an Android smartphone or an iPod Touch can all be centrally located in the same region thanks to centralized planning by Chinese authorities, who have complete discretion over density of plants and issues such as zoning. It is both dramatically less expensive to make an iPhone in China, and dramatically faster.

The entire supply chain cannot realistically be moved to the US, even if demand for such jobs existed. While Apple has intimated that it may be able to do more to bring some of the higher-paying jobs stateside, the majority of the work -- tool & die, rare earth mineral extraction, fabricating parts and assembly -- cannot be relocated, and dividing the labor between the two countries would dramatically increase both costs and manufacturing time. While President Obama may be correct about the realistic possibility of such jobs coming "back" to the US, Governor Romney's point about pressuring China to compete with other countries on a more level playing field is also well-taken, and worthy of further study and action.

Some portions of the iPhone is, in fact, made in the US. The processor, which Apple created using ARM-based foundations, is manufactured in Austin, Texas using both Apple and Samsung engineers, and Gorilla Glass is at least partially manufactured by Corning, a US company, in Kentucky. However, as President Obama pointed out -- these are exactly the kind of high-paying jobs the US wants. Most of the rest of making the iPhone requires much lower-skilled workers, particularly for final assembly, which does not command a high wage in either China or the US. Analysts estimate that the iPhone would need to sell for $65-100 more per unit -- and require considerable private and public investment in manufacturing infrastructure -- for devices like it to be made in the USA.

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No one in America is going to be able to compete in low-skilled assembly jobs with China. These kinds of jobs will never come back to America because these kinds of jobs migrate to poor countries. In fact, these are the same kinds of jobs that left Japan in the 80's and 90's. Companies like Foxconn save money by not using machinery which would normally be used for repetitive assembly. Foxconn is taking advantage of a market window where there is a great deal of technology churn, which makes it difficult to invest to heavily in automation because product life cycles are very short.

Where out-sourcing is really killing the US is in the skilled job market. Software development is increasingly performed in India and even Pakistan and is only managed by high-level project managers in the US. Computer processor designs (floor-plans) are are increasingly created by the same overseas foundries that manufacture the chips. Eventually, America may not only loose its edge in processor design, but also in software design and development. Americans need to be prepared to embrace high-skilled science and technology jobs or we could become a nation dependent on shaky world of real estate and financial investment to provide any economic growth.

While Romney is right that China is manipulating its currency to be more competitive internationally, there's absolutely nothing that can be done about this. You can threatening a trade war, but this will only hurt American citizens who will then pay more for Chinese-made goods. It will be immense short-term pain for American consumers while providing very little long-term gain for American businesses, if any.

Nations eventually give up currency suppression when they realize how much it hurts its own citizens. China cares more about rapid growth than citizen well-being, and until that changes, this currency issue will not go away.

And of course, just like Romney's vagueness on "loopholes and deductions," he has not said anything specific about exactly how he will "make China pay," making it yet another vague, empty promise from a vague, empty man.

We "outsource" because the USA is the highest taxing and regulatory nightmare of a country in the world. As far as Apple and Foxconn, do you have any idea how many workers actually WORK in ONE Foxconn plant? There are hundreds of thousands! In one plant! We do not have a concentration of people like that anywhere in our country to even staff half of a plant that size needed to build millions of widgets. These jobs will never come here for obvious reasons... An Iphone would cost $2000+ a copy if manufactured here, if not more.

And remember, if you do not already know, there are thousands of people waiting for those Foxconn jobs, they sit outside the factory gate 24/7 waiting for someone to quit or be fired to grab the job, along with the free room and board. This is a totally different culture, these are good jobs over there and highly desirable. But yet, here is the left and their unions, over there stirring the pot trying to organize. Trumpka was in Egypt organizing there for the "Arab Spring", we have seen the mess that has created. We do not want that in China, but that is exactly where this is leading.

Outsourcing to China is not about the cost of labor. At least that isn't the main reason it's done and neither candidate appears to have a clue what the real reason is. Many of the raw materials needed to produce these products are only mined/produced in China. China will NOT export these raw materials for any reasonable cost because they WANT to keep manufacturing in their own country. They are protecting their interests just as we want to protect ours. The only difference is that for manufacturing, they are holding all the cards.

Outsourcing to China is not about the cost of labor. At least that isn't the main reason it's done and neither candidate appears to have a clue what the real reason is. Many of the raw materials needed to produce these products are only mined/produced in China. China will NOT export these raw materials for any reasonable cost because they WANT to keep manufacturing in their own country. They are protecting their interests just as we want to protect ours. The only difference is that for manufacturing, they are holding all the cards.

There you effin go.... mining is a HUGE and growing industry... influencing the prosperity of nations.

Both candidates are right to a certain extent. China does manipulate its currency, and we sit idly by doing nothing about it. Even if we try to do something about it and that something fails, it's still better than not trying at all.

The US does want/need/desire highly skilled jobs, but news flash, guess what, not everyone in this country is nor will become highly skilled, educated, etc. There is still a place for low skill/wage jobs here. That does not suggest giving up on high skill/education, just realize it won't fit everyone.

The biggest detriment to jobs of all skill levels is a toxic economy brought about by egregious taxation and regulation. The US has to make itself attractive to business once again if we are to have any hope of future prosperity.

It was said that 'the type of low-wage jobs that China has will never come back to the US,' but that's just not true. The point that's being missed is the how, or the implementation. No, we probably will never have huge factories where tens of thousands of workers both live and work, but who said that is a requirement of manufacturing? Just because the Chinese do it that way does not mean it's the only way. The answer for the US is good old fashioned American ingenuity. What we do is streamline the manufacturing operation and automate where the Chinese don't, and then use that good old fashioned ingenuity to come up with some processes that have never been done before, anywhere.

America can get manufacturing back, not the old fart manufacturing, but new improved, unique methods of manufacturing. Start making progress, start making it attractive for companies to actually do business here, and you'll slowly see manufacturing, manufacturing support infrastructure, and even raw material processing begin to return. No, it won't happen overnight, and anyone who expects as much is not seeing reality, but it can slowly be restored, one component at a time.

This is the same situation with highly skilled/intelectual/educated jobs as well. If America doesn't bring its mojo back, and soon, all the jobs of all levels will go elsehwere.

Many of these rare earth minerals are available here in the USA, problem is, the leftists have locked them up and put them off limits in the name of saving the planet. China does have a lock on a few minerals, but not all. We have the means, problem is, our government punishes those who would do. And you can take that to the BANK.

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